Wall Street’s Dream Senator

How the lobbyists are angling to get Evan Bayh on the Banking Committee.

August 10, 2016

How does a Washington rumor get started? That’s the question I asked when reading the overwrought speculation about Evan Bayh, the former senator from Indiana, taking Sherrod Brown’s position as the top Democrat on the Senate Banking Committee.

Bayh has a very good chance to win back his Senate seat, and he served on the Banking Committee from 2000 to 2010. That actually gives him more seniority than Brown. Should Democrats take back the Senate in the fall, and should Bayh’s seniority be recognized by the majority leader, he would be in line to snatch the chairmanship of the committee.

That’s the theory of a bunch of K Street lobbyists, anyway, and it sounds like what they would ask for if they rubbed a genie lamp. After all, Bayh sits on the board of Fifth Third Bank and is a partner at McGuire Woods, the corporate law firm that counts a number of global banks as clients. He’s even worked at private equity firm Apollo Global Management, one of those “shadow banks” Hillary Clinton has warned are the real threat to the financial system. Compared to a populist reformer like Brown, who authored the legislation that would have broken up the largest U.S. banks, I’m sure the industry would welcome a Bayh leapfrog. So they’ve talked themselves into believing that somebody promised Bayh the Banking Committee chair if he entered the race for Senate.

The only problem with the idea is that it’s preposterous. While there is no formal rule about whether a senator gets back their seniority if they win a non-consecutive term, the history of the Senate firmly establishes that they don’t. Frank Lautenberg didn’t get his seniority back in 2003; neither did Dan Coats in 2011. Heck, Hubert Humphrey returned to the Senate in 1971, after a stint as vice president under Lyndon Johnson, and even he didn’t get his seniority back.

There’s a good reason for that. While the decision on seniority would be up to Chuck Schumer, the presumptive Democratic Senate leader, he probably doesn’t want to piss off the majority of his colleagues right off the bat. Bayh’s restored seniority would elevate him beyond 30 current senators, all of whom have an interest in rejecting such a move, since seniority matters for committee assignments and chairmanships.

What’s more, Bayh isn’t the only former senator likely to come back to the chamber. Wisconsin’s Russ Feingold has even more seniority built up than Bayh, having served three terms from 1992 to 2010. Only six Democrats would have more seniority than Feingold after the 2016 election. Does that mean Feingold and his superior seniority would take over the Foreign Relations Committee? Or, if Patrick Leahy switched chairmanships, Judiciary?

Whether moderates or progressives have the upper hand on the Democratic side will dictate that process, regardless of who holds the gavel.

The last thing a coalition-builder like Schumer would want to do is anger his entire caucus by breaking with longstanding practice, especially to elevate a bank-friendly senator to run the Banking Committee. The Democratic platform is far closer to Brown’s view of financial regulation than Bayh’s. And Schumer already has to fight the impression that he serves as Wall Street’s lifeline in Congress. It would be a suicide mission.

So assuming Schumer didn’t come up with this doomed idea, and Bayh’s campaign didn’t either (they didn’t respond to my request for comment), how did this fevered speculation get placed in American Banker, the leading Wall Street trade publication? The answer might tell us something about how Washington works.

Practically everyone quoted in the American Banker story is a financial lobbyist. Unquestionably, they want to prevent Sherrod Brown from running roughshod over Wall Street and making the lives of their clients more unbearable. They’d love Evan Bayh to run the committee, even if that’s highly unlikely to happen. But they can also constrain Brown by changing the makeup of the committee membership.

Right now there are 22 members on the committee, 12 Republicans and 10 Democrats. If Democrats win back the Senate, that would flip, giving them 12 members. In addition, Schumer, who sits on the committee now, would be expected to leave when he becomes Democratic leader; Harry Reid only sits on the Intelligence Committee.

That means two or three new members will get onto the Banking Committee. If enough of them have sympathies with the financial industry, it could shift the balance of power there. Right now there’s a rump faction—composed of Jon Tester, Mark Warner, Joe Donnelly, and Heidi Heitkamp—that is more moderate, relative to the dominant reform faction led by Brown, Elizabeth Warren, and Oregon’s Jeff Merkley. But what if Schumer assigns Bayh to the committee, not as the chair but a regular member? Or what if he appoints Gary Peters, last seen signing the same letters seeking to exempt banks from regulation that drew criticism for Tim Kaine?

This may seem trivial or obscure, but there’s a lot at stake. Hillary Clinton has a fairly expansive financial reform agenda, both through legislation (which would route through the committee) and implementation of existing laws. Congressional oversight of what the banks—and more importantly, the regulators—are doing matters greatly. If Clinton wins, the Banking Committee will have to advance or bottle up her financial regulatory appointments. Whether moderates or progressives have the upper hand on the Democratic side will dictate that process, regardless of who holds the gavel.

And that was probably the real intent behind this rumor-mongering about Bayh. Lobbyists put out an outlandish theory to cover up their actual hope, to stack the Banking Committee with more senators friendly to their cause. That way, if Brown obtains the chair instead of Bayh, it’s seen as a “victory” for progressives, even if the stacking occurs, weakening Brown’s position. It’s a classic misdirection play, to focus attention on the chairmanship when it’s the seats at the bottom of the membership ladder that really count.

Maneuvering in Washington can sometimes be impossible to comprehend. But if a bunch of lobbyists are seeding the media with speculative pipe dreams, you have to ask what they’re really after. In this case, it appears that, by pretending that they want to chop off the head of the Senate Banking Committee, they can succeed by cutting the committee off at the knees.